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Amazon and Forever 21 circle bankrupt American Apparel

Lauretta Roberts
05 January 2017

Amazon and Forever 21 are both believed to be circling stricken US brand American Apparel, according to reports.

Reuters says sources close to the matter have confirmed that Amazon, Forever 21, apparel manufacturer Next Level Apparel and brand licensor Authentic Brands Group LLC are all in talks with American Apparel and its advisers about a potential acquisition ahead of Friday's deadline.

American Apparel is currently in Chapter 11 in the US, having entered the bankruptcy protection status in November for the second time in a year. Its UK arm was placed into administration in November and all but one of its 14 stores were closed before Christmas with the last store, in Camden, due to close this month.

Any bid made for the US business would have to top a $66m bid by stalking horse bidder, Canadian apparel group Gildan. Gildan has agreed to buy certain assets and the American Apparel brand but did not want any of its retail stores. Nine underperforming US stores, which were deemed not to add value to any possible sale of the retail business, have already been closed.

It is understood that any offer that came with a pledge to retain production in the US would be looked upon favourably, particularly in light of Donald Trump's election. While Gildan's offer included an option to keep American Apparel's manufacturing facilities in southern California, which employ 3,500 workers, it plans to preserve only some of this production should its bid prevail.

American Apparel's proud Made in the USA claim was part of its early appeal when it was founded in 1989 and in the subsequent years. Its founder Dov Charney went against the grain of the prevailing trend at the time to source clothing from low-cost countries. However this did lead to higher prices and during the downturn of the late 2000s it struggled to compete.

The brand also came under fire for its provocative advertising and Charney himself was the subject of sexual harassment claims which he has denied.

The outcome of the auction for the brand and its assets is expected to be known next week.

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